PM to launch Cairn’s Mangala production Saturday


New Delhi : In a major boost to India’s quest for energy security, Prime Minister Manmohan Singh will Saturday kick off Cairn India’s oil production from Rajasthan’s Mangala fields, the site of the country’s largest oil discovery in two decades.

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According to Cairn India, the peak output from the wells at Mangala will amount to 125,000 barrels per day (bpd). Along with the production at Bhagyam and Aishwarya fields (also in Rajasthan), the aggregate peak production will be 175,000 bpd or 20 percent of India’s domestic production – enough to power 3.4 million cars daily or fill up 4.5 million cooking gas cylinders a month.

The country imports over 70 percent of its crude oil needs. “We estimate that it (the 175,000 bpd) will alleviate imports by 8 percent,” said company chief executive and managing director Rahul Dhir in a conference call Wednesday.

The three fields are expected to save the country $1.5 billion annually as import outgo over the next 10 years. It would also earn the government $30 billion across the life of the field by way of taxes, royalties and profit petroleum.

“We will gradually ramp up production in Mangala from a few thousand to 30,000 barrels per day (bpd),” Dhir added.

Mangala’s peak production of 125,000 bpd will be reached in the first half of 2010.

Having already invested $2 billion till date, Cairn India plans to invest another $1.2 billion to $1.3 billion in Mangala fields, in which ONGC has a 30 percent stake.

“For the next two years, we are going for $1.5-1.8 billion with our partners, in which our share of the investment is $1.2-1.3 billion,” he said.

He said the government was committed to buy the crude from Cairn India. So far, it has nominated ONGC’s Mangalore Refinery and Petroleum Ltd (MRPL) and Indian Oil Corp (IOC) to take the crude from the Mangala fields.

“The output for Mangala will be 125,000 barrels per day. The commitment for fiscal year 2011 is 65,000 bpd. But, we have been reassured by the government that there will no problem on further nominations,” said Dhir.

The operating cost will be $3.5 per barrel excluding transportation cost. But with the pipeline from the fields not yet ready, the initial consignments will be send by truck to MRPL, which will drive up the costs to $12 per barrel.

However, Dhir said that once the 700-km pipeline to Gujarat coast gets operational by the year-end, the total cost of production would come down to $5 per barrel – out of which $1.5 per barrel will be the pipeline transportation cost.